Flint Tooling Company is considering replacing a machine that has been used in its factory for four years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows: Old Machine Cost of machine, 10-year life $109,900 Annual depreciation (straight-line) 10,990 Annual manufacturing costs, excluding depreciation 39,400 Annual nonmanufacturing operating expenses 12,800 Annual revenue 94,700 Current estimated selling price of the machine 36,900 New Machine Cost of machine, six-year life $136,800 Annual depreciation (straight-line) 22,800 Estimated annual manufacturing costs, exclusive of depreciation 18,600 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. Required: 1. Prepare a differential analysis as of November 8 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential income that would result over the six-year period if the new machine is acquired. If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) November 8 Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effect on Income (Alternative 2) Revenues Proceeds from sale of old machine $fill in the blank eaffccff9ff3046_1 $fill in the blank eaffccff9ff3046_2 $fill in the blank eaffccff9ff3046_3 Costs Purchase price fill in the blank eaffccff9ff3046_4 fill in the blank eaffccff9ff3046_5 fill in the blank eaffccff9ff3046_6 Annual manufacturing costs (6 yrs.) fill in the blank eaffccff9ff3046_7 fill in the blank eaffccff9ff3046_8 fill in the blank eaffccff9ff3046_9 Income (Loss) $fill in the blank eaffccff9ff3046_10 $fill in the blank eaffccff9ff3046_11 $fill in the blank eaffccff9ff3046_12 2. What other factors should be considered before a final decision is reached? Are there any improvements in the quality of work turned out by the new machine? What opportunities are available for the use of the funds required to purchase the new machine? Are there any improvements in the quality of work turned out by the new machine and what opportunities are available for the use of the funds required to purchase the new machine? What affect would this decision have on employee morale? None of these choices is correct.

Flint Tooling Company is considering replacing a machine that has been used in its factory for four years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows: Old Machine Cost of machine, 10-year life $109,900 Annual depreciation (straight-line) 10,990 Annual manufacturing costs, excluding depreciation 39,400 Annual nonmanufacturing operating expenses 12,800 Annual revenue 94,700 Current estimated selling price of the machine 36,900 New Machine Cost of machine, six-year life $136,800 Annual depreciation (straight-line) 22,800 Estimated annual manufacturing costs, exclusive of depreciation 18,600 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. Required: 1. Prepare a differential analysis as of November 8 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential income that would result over the six-year period if the new machine is acquired. If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) November 8 Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effect on Income (Alternative 2) Revenues Proceeds from sale of old machine $fill in the blank eaffccff9ff3046_1 $fill in the blank eaffccff9ff3046_2 $fill in the blank eaffccff9ff3046_3 Costs Purchase price fill in the blank eaffccff9ff3046_4 fill in the blank eaffccff9ff3046_5 fill in the blank eaffccff9ff3046_6 Annual manufacturing costs (6 yrs.) fill in the blank eaffccff9ff3046_7 fill in the blank eaffccff9ff3046_8 fill in the blank eaffccff9ff3046_9 Income (Loss) $fill in the blank eaffccff9ff3046_10 $fill in the blank eaffccff9ff3046_11 $fill in the blank eaffccff9ff3046_12 2. What other factors should be considered before a final decision is reached? Are there any improvements in the quality of work turned out by the new machine? What opportunities are available for the use of the funds required to purchase the new machine? Are there any improvements in the quality of work turned out by the new machine and what opportunities are available for the use of the funds required to purchase the new machine? What affect would this decision have on employee morale? None of these choices is correct.

Name: Flint Tooling Company is considering replacing a machine that has been
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Description: Flint Tooling Company is considering replacing a machine that has been used in its factory for four years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 79.3C

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Old Machine
Cost of machine, 10-year life	$109,900
Annual depreciation (straight-line)	10,990
Annual manufacturing costs, excluding depreciation	39,400
Annual nonmanufacturing operating expenses	12,800
Annual revenue	94,700
Current estimated selling price of the machine	36,900

New Machine
Cost of machine, six-year life	$136,800
Annual depreciation (straight-line)	22,800
Estimated annual manufacturing costs, exclusive of depreciation	18,600

Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.

Required:

1. Prepare a differential analysis as of November 8 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential income that would result over the six-year period if the new machine is acquired. If an amount is zero, enter zero "0". Use a minus sign to indicate a loss.

Differential Analysis
Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
November 8
	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues
Proceeds from sale of old machine	$fill in the blank eaffccff9ff3046_1	$fill in the blank eaffccff9ff3046_2	$fill in the blank eaffccff9ff3046_3
Costs
Purchase price	fill in the blank eaffccff9ff3046_4	fill in the blank eaffccff9ff3046_5	fill in the blank eaffccff9ff3046_6
Annual manufacturing costs (6 yrs.)	fill in the blank eaffccff9ff3046_7	fill in the blank eaffccff9ff3046_8	fill in the blank eaffccff9ff3046_9
Income (Loss)	$fill in the blank eaffccff9ff3046_10	$fill in the blank eaffccff9ff3046_11	$fill in the blank eaffccff9ff3046_12

2. What other factors should be considered before a final decision is reached?

Are there any improvements in the quality of work turned out by the new machine?
What opportunities are available for the use of the funds required to purchase the new machine?
Are there any improvements in the quality of work turned out by the new machine and what opportunities are available for the use of the funds required to purchase the new machine?
What affect would this decision have on employee morale?
None of these choices is correct.

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